Request for Reimbursement of Lease Settlement Costs

A chief finance and budget officer requested a determination as to whether an employee may be reimbursed lease settlement costs at his old duty station which arose incident to a permanent change of duty station. The employee claimed expenses associated with breaking a 1-year lease into which he entered at a time when he knew that he would be reassigned within 4 to 6 months. The lease contained provisions that a deposit would be forfeited upon any nonperformance of the lease, such as early departure, and that early departure would obligate the employee for any difference between the rent that would have been payable under the lease and the net rent recovered by the lessor upon rerenting the premises. GAO agreed with the agency's view that the lease termination costs claimed should have been avoided in the first place. Under applicable legislation, an employee may not be reimbursed for expenses chargeable at the expiration of a lease. Where an employee executes a 1-year lease with the knowledge that his occupancy will terminate within a few months and that under the lease he will be subject to a penalty for early termination, those anticipated termination expenses are not the type that are intended to be reimbursed under regulations. Accordingly, the lease termination costs claimed may not be reimbursed.